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Secrets of Software Success
Servaas Oostrik
Gert-Jan Beukenkamp
Secrets of Software SuccessManagement insights from 100 software firms
around the world
Hoch, D.J.
Roeding, C.R.
Purkert, G
Lindner, S.K.
Müller, R.
Outline
• Introduction
• Research methodology
• Book review
• Critique
• Conclusion
• Discussion
Introduction
• Evolution software business– Era I -“professional services firms”
• 1949 to 1959
• tailor-made solutions
– Era II - “software product companies”• 1959 to 1969
• emerging software products
Introduction
• Evolution software business– Era III - “enterprise solution providers”
• 1969 to 1981• software separation
– Era IV - “Consumer mass-market software”• 1981 to 1994• PC-based
– Era V - “Internet value added services”• 1994 to ????
Outline
• Introduction
• Research methodology
• Book review
• Critique
• Conclusion
• Discussion
Research methodology
• Interviews– 100 companies
• size
• geography
• business type
• performance
– experts• academic, and consultants
• related industries
Research methodology
15%
41%
32%
12%
Very large
Large
Medium
Start-up
Size
39%
9%
52% USA
Asia
Europe
Geography
21%
34%
45%
Mass marketpackaged
Enterprisesolutions
Professionalservices
Business type
Research methodology
• Interviews– 100 companies
• size
• geography
• business type
• performance
– experts• academic, and consultants
• related industries
Research methodology
• Compounded success measure– annual growth rates– average return on sale
• Ranking in accordance with overall success
ROS
GrowthOverallsuccess
34 successful companies
32 average companies
34 less successful companies
Comparison between
upper and lowercompanies
Interviewerevaluation
Outline
• Introduction
• Research methodology
• Book review
• Critique
• Conclusion
• Discussion
Book review
1 A new business called “software”2 Exceptional software leaders are the rule3 Winning the war for software talent4 Software development5 Marketing gods make software kings6 Professional software services7 Grow your partners to grow yourself8 The landscape of the future
A new business called“software”
• Industry segmentation
– Software services
– Software products
• Enterprise solutions
• Mass-market packaged software
A new business called“software”
low medium high Degree ofstandardization
Salesunits
Professional service
Enterprise solutions
Packagedmass-market
software
Product business
Services business
1
10.000
10,000,000
A new business called“software”
• Enterprise solutions VS Mass-market software
– Customization VS standardization
– Long installation VS instant installation
– Few customer VS mass-market
A new business called“software”
Professional software Product softwareMarginal costs Almost constant Almost zero
Market structure Highly fragmented Higher concentration
Regionalappearance
Mainly regional, someglobalization
Highly globalized
Customerrelationship
One to one One to few, one to many
Most importantnumber to watch
Capacity utilization rate Market share(installed base)
Relevance ofmanagementareas
1.Human resources2.Software development3.Marketing and sales4.Strategy
1.Strategy2.Marketing and sales3.Human resources4.Software development
Book review
1 A new business called “software”2 Exceptional software leaders are the rule3 Winning the war for software talent4 Software development5 Marketing gods make software kings6 Professional software services7 Grow your partners to grow yourself8 The landscape of the future
Exceptional software leaders are the rule
• The essential characteristics of leaders (I)– personal traits
• deal with high levels of uncertainty
• constant awareness
• take risks, aim high
• accept failure (quickly)
• keep multiple options
Exceptional software leaders are the rule
• The essential characteristics of leaders (II)– management views
• create dynamic organizations– use flat structures
• make use of teams– knowledge diffusion
• awareness of company-growth
Book review
1 A new business called “software”2 Exceptional software leaders are the rule3 Winning the war for software talent4 Software development5 Marketing gods make software kings6 Professional software services7 Grow your partners to grow yourself8 The landscape of the future
Winning the war for software talent
• Skilled workers are scarce
• Need for new recruitment practices– recruit students– recruitment via personnel– use financiers networks– global sourcing– reallocation near recruits– WWW-recruitment
Winning the war for software talent
• Motivating workers (to join)– allow personal work styles– use profit-sharing schemes– create strong corporate culture– high internal job turn-over
• creating career opportunities
Book review
1 A new business called “software”2 Exceptional software leaders are the rule3 Winning the war for software talent4 Software development5 Marketing gods make software kings6 Professional software services7 Grow your partners to grow yourself8 The landscape of the future
Software development
• Common characteristic: FAILURE– Time – Budget – Missing features– Cancellation before completion
Chance of failure higher than success
Software development
• High uncertainty– Unclear customer requirements– Design not entirely predictable– Changing requirements– Changing technology
Software development
Upstream phase
Downstream phase
Requirements analysis
Design
CodingIntegrating & testing
Maintenance
Time
Degree ofuncertainty
Software development
• Reasons for failure software products (I)– Overly optimistic developers
• Too optimistic schedule
• Murphy’s law
– Adding of people• Work can not be partitioned
• Increase communication time
Software development
• Reasons for failure software products (II)– Underestimating efforts product-project process
• Broader design• Technical environments
– External pressures• Marketing/management• Customers
– Feature creep• Having to make changes during development
Software development
• How to improve the mission I– Preparing for uncertainty
• Establish product feature flexibility
• Adapt to upstream-downstream
• Spend time to save time– Invest in people
• Create powerful team structures
• Retaining top talent
Software development
Upstream phase
Downstream phase
Requirements analysis
Design
CodingIntegrating & testing
Maintenance
Time
Degree ofuncertainty
Software development
• How to improve the mission I– Preparing for uncertainty
• Establish product feature flexibility
• Adapt to upstream-downstream
• Spend time to save time– Invest in people
• Create powerful team structures
• Retaining top talent
Software development
• How to improve the mission II– Improve the process
• Involve project stakeholders– Involve end-users
– Involve marketing
– Frequent project reviews with all stakeholders
• The daily build– Teams test and debug every day
– Finds defects between interacting models
– Morale effects
Software development
• A new trend?– Componentware
• Reusing components
• Enormous benefits
• Platinum has already begun
– Difficulties• Large up-front investment
• Mindset developers in need of change– Awards for ‘stealing’ codes
Book review
1 A new business called “software”2 Exceptional software leaders are the rule3 Winning the war for software talent4 Software development5 Marketing gods make software kings6 Professional software services7 Grow your partners to grow yourself8 The landscape of the future
Marketing gods make software kings
• Success depends on marketing– recovering R&D
• Marketing for dominant position– owning standards– achieving “lock-in”– market leadership enforces buying decision
Marketing gods make software kings
• How to create a dominant position (I)– careful positioning
• build strong product-portfolio
• careful customer selection
• global approach
– careful targeting• use “self-fulfilling” approach
– create market leadership before launch
– product try-outs
Marketing gods make software kings
• How to create a dominant position (II)– careful targeting
• use monitored “piracy”– creates large customer base
• use third-party sales channels– pre-installation
– system integration
• aggressive advertising– brand vs technology
– business propositions
Marketing gods make software kings
• How to sustain dominant position– release upgrades in close intervals– create need for upgrade
• use early promotion
• increase switching costs
• use Public Relations– CEO as strong image
Marketing gods make software kings
• Breaking dominant position (I)– when?
• Upside potential– strategic importance to product portfolio
– large or growing market potential
• low entry barriers– new technologies
– low switching costs
– weak competitor(s)
Marketing gods make software kings
• Breaking dominant position (II)– how?
• Buy market leader
• lower switching costs or offer switching advantages
• use different business model
• provide or use different platform
• use strategic alliance
Book review
1 A new business called “software”2 Exceptional software leaders are the rule3 Winning the war for software talent4 Software development5 Marketing gods make software kings6 Professional software services7 Grow your partners to grow yourself8 The landscape of the future
Professional software services
• One-to-one relationships
• Not aggressive
• Building trust
• Reputation is vital
• Most have experienced a project failure
Professional software services
• Trust builders I– Sponsoring hot-topic IT conferences– Discussion circles
• Selective gathering– Building online web communities– Creating trustworthy image
• Using the best consultants• Publishing the firm’s success stories• Packaging the firm’s software services• Building on previous success
Professional software services
• Trust builders II– Deepening customer relations
• Tracking customer satisfaction
• Going the extra mile
• Asking for critique
• Appointing relation managers for each client
– But stay tough!!• Negotiate prices
• Don’t accept all the wishes
Book review
1 A new business called “software”2 Exceptional software leaders are the rule3 Winning the war for software talent4 Software development5 Marketing gods make software kings6 Professional software services7 Grow your partners to grow yourself8 The landscape of the future
Grow your partners to grow yourself
• Partnering– Exceptional efforts are undertaken
• Training
• Pampering
– Large partner clubs• Factor 4
– Equality of partners• Direct relationship
Grow your partners to grow yourself
• Strategic imperative– Closing the gaps– Focusing on key competencies– Accelerating time to market– Increasing market penetration
• A new level of equality among partners– R&D partners– Complementary product or service partners– Marketing partners– Implementation and maintenance partners
Grow your partners to grow yourself
BUSINESS WEBS
• Creating incentives to join the web– Incentives to supply new software– Incentives to demand existing software
• Software webs– The more the powerful– Friends and enemies in one– Shapers– Adapters
Grow your partners to grow yourself
• Retaining key partners– Trust– Monitoring partner performance– “Certified partners”– Product experts participating in implementation– Playing in more than one web– Building privileged relationships in a sub-web
Book review
1 A new business called “software”2 Exceptional software leaders are the rule3 Winning the war for software talent4 Software development5 Marketing gods make software kings6 Professional software services7 Grow your partners to grow yourself8 The landscape of the future
The landscape of the future
• Future implies growth– growth from products
• internet applications
• embedded software– growth of new partnerships
– growth from geographical expansion• global markets
The landscape of the future
• Future implies quality and productivity gains– the fully digitized business system
– offshore outsourcing
• New balance between services and products– one-stop shopping
– componentware
– “servicization”• network based services
Outline
• Introduction
• Research methodology
• Book review
• Critique
• Conclusion
• Discussion
Critique
• Major lack in research methodology– Minimal framework
• Experience surveys
• Two measures for success– Three year period
– Omission middle group– Money oriented/impressed by leaders
Critique
• Baan is praised– But?– Stock value to nearly 1$
• What about goodwill– Stock overestimation
• Conclusions seem easily drawn – Deductive reasoning
Critique
• American way– Focus on US companies – Praise American work– American style
Outline
• Introduction
• Research methodology
• Summary
• Critique
• Conclusion
• Discussion
Conclusion
Professionalsoftware services
Enterprisesolutions
Mass-Marketsoftware
1.Peoplemanagement
1.Partnering 1.Marketing
2.Human resourceassignment
2.Servicestrategy
2.Partnering
3.Development 3.Marketing 3.Globalization
4.Marketing 4.Peoplemanagement
4.Peoplemanagement
5.Partnering 5.Development 5.Development
Conclusion
• Pleasure to read
• Many interesting insights– Great personal stories
• Good overview software business evolution
Conclusion
• However!– Typically American– Lack of scientific depth– Example oriented– Baan is out of the picture– Title to promising
Outline
• Introduction
• Research methodology
• Summary
• Critique
• Conclusion
• Discussion
Discussion
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